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Japanese Beef Buyers May Get Frozen Out by Tariff Hike

21 August 2017

JAPAN - Japan's newly imposed emergency tariff on frozen American beef has raised a question about the wisdom of hanging on to a relic of a bygone trade framework when securing enough beef to meet domestic demand could become a challenge amid the tightening global supply.

According to Nikkei Asian Review, Japanese imports of US beef abruptly skyrocketed around mid-May.

The safeguard tariff was triggered as food companies such as beef-bowl chain operators made big purchases of frozen American beef, a government source with knowledge of the situation said.

Stubbornly high Australian beef prices, stemming from a drought, played a role. But China was the main factor.

Newfound rivals

Beijing announced plans on 11 May to resume imports of US beef for the first time in 14 years, ending a ban imposed in response to an outbreak of mad cow disease. It was the first big success to come out of an agreement at a US-China summit in early April that paved the way for the start of a bilateral economic dialogue and the execution of a 100-day action plan for correcting trade imbalances.

Fearing that a rush of Chinese buying would send prices soaring, Japanese companies scrambled to get their hands on American beef first. This boosted imports of frozen US beef by 20 per cent on the year in the April-June quarter, breaching the 17 per cent threshold at which the safeguard mechanism automatically kicks in.

The duty was raised from 38.5 per cent to 50 per cent on 1 August and will remain in effect until the end of March. The change already has affected prices for some products.

In the Uruguay Round of talks on the General Agreement on Tariffs and Trade in the 1990s, Japan agreed to reduce its beef duty in exchange for the ability to hike the levy as an emergency measure to rein in sudden import surges.

But more than two decades later, new risks present themselves. Japanese food companies worry that even if they want to import American beef, they could lose out to Chinese rivals able to offer higher prices.